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US To Extend Iran Oil Sanctions Exemptions To India and Three Other Countries: Reports

Washington is likely to extend ‘expiring sanctions’ waivers to at least four of Iran’s top crude customers but will require buyers to be reduced import by another 20%. This move by the US will drop the Iranian exports to below 800,000 b/d within a month, according to an S&P Global Platts survey.

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The Trump administration is expected to allow China, India, South Korea and Turkey to continue to import Iranian crude and condensate for another six months, while letting waivers for Italy, Greece, Japan and Taiwan expire in early May, according to the survey, which polled a dozen analysts closely tracking Iranian oil sanctions policy.

One source familiar with the administration’s current plans for next month said the US would allow China to maintain its current Iranian imports of about 500,000 b/d, require India to cut to 300,000 b/d from 350,000 b/d currently, and Turkey to about 75,000 b/d. Under the current plan, South Korea would be tasked with lowering its Iranian condensate purchases by another 10%, or about 18,000 b/d, this source said.

But, the Trump administration’s plans on Iran sanctions remain in flux, multiple sources said this week.

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The current, six-month waivers, known as significant reduction exemptions, expire in early May.

With the waivers in place, Iranian crude and condensate exports averaged about 1.3 million b/d in Q1 2019, up about 170,000 b/d from Q4 2018 when purchases of Iranian crude dipped because of questions over the reimposition of US sanctions in November, according to Platts Analytics. The Trump administration did not publicly signal its intent to grant waivers until they were initially announced November 2.

That uncertainty will again cause Iranian crude and condensate exports to dip, this time to about 800,000 b/d before the likely extensions of sanctions waivers are announced in May, according to Platts Analytics.

According Sara Vakshouri, president of SVB Energy International, Iran’s oil exports will fall to between 700,000 b/d and 950,000 b/d if the US grants waivers to all countries currently importing Iranian crude. But if the administration takes a stricter stance, requiring countries to further reduce imports and allowing waivers for Korea and Japan to expire, Iranian imports could fall as low as 500,000 b/d after May.

Iranian oil shipments climbed to a four-month high of about 1.51 million b/d in February, including nearly 572,500 b/d to China, according to data from shipping sources and provisional tanker tracking data.

While all 12 analysts surveyed this week were confident waivers to Iran’s top four export markets will be extended, they all said there was a slim possibility that Trump could ultimately allow all the waivers to expire as part of the “maximum pressure” campaign on Iran.

“The political benefits of zeroing out Iran’s oil exports at this point must be weighed against the political benefits of keeping oil — and gasoline — prices from rising too much,” said Ellen Wald, an energy industry and policy consultant at Transversal Consulting. “The administration can get two wins if it looks like it is being incrementally tougher by lowering the exemptions numbers in some way, but still allowing Iranian exports to help balance the market.”

Surveyed analysts said President Trump’s political sensitivity to gasoline prices, highlighted by his semi-frequent tweets to OPEC to keep oil prices down, will likely outweigh any pressure from within his administration and elsewhere to end the Iran waivers completely in May.

“The [2020 presidential] election is within view, and while this won’t live or die on gasoline prices given everything else, there is no desire to court danger with a higher price,” one analyst said.

At CERAWeek in Houston earlier this month, Brian Hook, the US State Department’s special representative for Iran, said that global oil supply and demand balances, as well as the impact of ongoing US sanctions on Venezuelan crude flows, will weigh on the Iran waivers decision.

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Analysts said this week that there was no oil price threshold where Trump would consider strengthening or weakening the Iran waivers, but said the closer Brent got to $80/b the less likely an end of waivers became. May ICE Brent crude futures were trading at about $68.40/b Friday afternoon, up about 60 cents from Thursday’s settlement.

Trump may be unlikely to drop the waivers because of the price impact it could have, due to market expectations, said Joe McMonigle, an analyst with Hedgeye Risk Management.

“I believe waiver renewals are already priced into the market, and therefore any change in policy would be a surprise to the market and only help to overheat already rising oil prices,” McMonigle said.

Instead, the administration will likely wait until just before the waivers reach expiration in early May, before announcing their plans, an option which will cause Iranian exports to dip, even without policy changes, said Matthew Reed, vice president with Foreign Reports.

“Building suspense over the decision, like we saw last time, will make buyers think twice about taking Iranian oil leading up to the deadline,” said Reed. “It’s taken a long time for Iranian exports to rise and stabilize since sanctions were imposed in November and they could drop off again in April in anticipation of the May decision, which is what the White House wants.”

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